The ets gene family encodes transcription factors related to the proto‐oncogene c‐ets‐1 and involved in cell proliferation, differentiation, and oncogenic transformation. We have characterized the Xenopus homologue of the human erg gene, an ets‐related‐gene, and its expression has been examined throughout early embryonic development. Xl erg encodes at least two proteins, resulting from alternative splicing events. The transcripts are restricted to the forming endocardium, the endothelial cells of the blood vessels and to the neural crest‐derived mesenchyme cells of the pharyngial arches. When Xl ERG is expressed ectopically in Xenopus embryos by microinjection of synthetic mRNA, multiple developmental defects are observed. Dorsally injected embryos have their AP axis shortened and present severe defects in eye and somite morphogenesis. Ventrally injected embryos show a posteriorization of the cells having received the message together with ectopic endothelial cell differentiation as revealed by the accumulation of X‐msr transcripts. In both cases, accumulation of erythrocytes in structures not connected with the blood circulatory system can be observed. Our data suggest that Xl erg may be involved in cell motility and in the development of the circulatory system. Dev Dyn 1999;216:420–433. ©1999 Wiley‐Liss, Inc.